Answered Essay: Following are the selected account balances of Shanta Company:

Following are the selected account balances of Shanta Company:

  Sales $ 1,250,000
  Raw materials inventory, Dec. 31, 2012 37,000
  Goods in process inventory, Dec. 31, 2012 53,900
  Finished goods inventory, Dec. 31, 2012 62,750
  Raw materials purchases 175,600
  Direct labor 225,000
  Factory computer supplies used 17,840
  Indirect labor 47,000
  Repairs—Factory equipment 5,250
  Rent cost of factory building 57,000
  Advertising expense 94,000
  General and administrative expenses 129,300
  Raw materials inventory, Dec. 31, 2013 42,700
  Goods in process inventory, Dec. 31, 2013 41,500
  Finished goods inventory, Dec. 31, 2013 67,300
Prepare an income statement for Shanta Company (a manufacturer). Assume that its cost of goods manufactured is $534,390.

Expert Answer

 

1. Schedule of Raw Materials Placed in Production

Particulars Amount
Raw material inventory, Beginning balance 37000
Add : Raw material purchased 175600
Less : Raw material inventory, Closing balance (42700)
Raw Material placed in production 169900
Less : Indirect labor (47000)
Direct Material placed in production 122900

2. Schedule of Cost of Goods Sold

Particulars Amount
Finished goods inventory, Beginning Balance 62750
Add : Cost of goods manufactured 534390
Cost of goods available for sale 597140
Less : Finished goods inventory, Ending Balance (67300)
Cost of Goods Sold 529840

3. Income Statement

Particulars Amount
Sales 1250000
Less : Cost of Goods Sold (Refer statement 2 above) (529840)
Gross Profit 720160
Less : Operating expenses:

  • Advertising expense = 94000
  • General and administrative expenses = 129300
223300
Operating Profit 496860
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